<PAGE> 1
2000 ANNUAL REPORT
CENTENNIAL
GOVERNMENT
TRUST
JUNE 30, 2000
<PAGE> 2
DEAR SHAREHOLDER:
A series of six short-term interest rate hikes initiated by the Federal Reserve
Board marked the fiscal year that ended June 30, 2000. Prompted by ongoing
inflation concerns, Fed Chairman Alan Greenspan took a gradual approach to
slowing an overheated domestic economy, raising rates by a quarter point on five
occasions, then most recently with a more-aggressive half-point increase.
Although this measured course of action initially appeared to produce no
tangible signs of cooling, reports toward the end of the period suggested a
slight moderation in economic growth.
Against this backdrop, Centennial Government Trust produced an annualized yield
of 4.96%, and an annualized yield including the effects of compounding of 5.04%,
for the fiscal year. The Trust's seven-day and compounded seven-day yields on
June 30, 2000, were 5.90% and 6.07%, respectively.(1)
While the Trust is managed to emphasize liquidity and safety, the reported
yields for the period ending June 30, 2000, were generally higher than those
reported six months ago, due primarily to higher short-term interest rates
during the second half of the period.
In anticipation of these higher rates, we kept our average maturity considerably
short. This enabled us to respond more effectively to changing conditions
without incurring undue risk. However, because interest rates were rising at
fairly frequent intervals, there was unprecedented demand for securities with
shorter maturities. As the supply of short-term U.S. Treasury bills came under
pressure, their prices, already expensive in our view, moved even higher. Their
yields, in turn, trended downward.
Therefore, we focused our sites on U.S. Government agency securities, which
offered attractive yields at what we believed were more reasonable valuations.
These short-term securities are issued by agencies such as the Federal National
Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation
(Freddie Mac). We also held a sizable position in repurchase agreements, which
are issued by a bank or other institution but backed by U.S. Government or
agency securities. In both cases, they are generally highly liquid. All told,
U.S. Government agency securities comprised 91.2% of net assets at year-end,
while repurchase agreements accounted for 6.1%.(2)
Going forward, it's unclear whether the Federal Reserve will need to continue to
pursue a tight monetary policy. The Fed took a wait-and-see approach at the June
28, 2000, Federal Open Market Committee meeting, and still maintains a close eye
on stock market performance and consumer confidence. We have recently started to
purchase securities with maturities in excess of 90 days.
An investment in the Trust is neither insured nor guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the Trust
may seek to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Trust.
1. Compounded yields assume reinvestment of dividends. Past performance is not
indicative of future results.
2. Based on total market value of net assets.
<PAGE> 3
In closing, we'd like thank you for your continued confidence and participation
in Centennial Government Trust. We look forward to helping you seek your
financial goals, while attempting to maintain the liquidity and safety of your
investment.
Sincerely,
/s/ JAMES C. SWAIN
James C. Swain
Chairman
Centennial Government Trust
/s/ BRIDGET A. MACASKILL
Bridget A. Macaskill
President
Centennial Government Trust
July 24, 2000
<PAGE> 4
STATEMENT OF INVESTMENTS June 30, 2000
Centennial Government Trust
<TABLE>
<CAPTION>
Principal Value
Amount See Note 1
----------- ------------
<S> <C> <C>
REPURCHASE AGREEMENTS-- 6.1%
Repurchase agreement with PaineWebber, Inc., 6.60%,
dated 6/30/00, to be repurchased at $72,639,930 on 7/3/00,
collateralized by Federal National Mortgage Assn.,
6.50%--7%, 1/1/27-8/1/29, with a value of $117,209,568........... $72,600,000 $ 72,600,000
------------
U.S. GOVERNMENT AGENCIES--91.2%
Federal Home Loan Bank:
5.39%, 10/6/00.................................................... 29,000,000 28,860,666
6.42%, 7/14/00-8/4/00............................................. 55,000,000 54,816,317
6.46%, 9/13/00.................................................... 30,000,000 29,601,633
6.47%, 9/20/00.................................................... 35,000,000 34,490,488
6.48%, 9/8/00..................................................... 32,500,000 32,096,350
6.49%, 9/22/00.................................................... 35,000,000 34,476,293
Federal Home Loan Mortgage Corp.:
6.40%, 7/11/00.................................................... 10,000,000 9,982,167
6.41%, 7/5/00..................................................... 25,000,000 24,982,194
6.42%, 7/6/00..................................................... 14,560,000 14,547,017
6.43%, 7/25/00-8/17/00............................................ 99,539,000 98,898,183
6.45%, 7/18/00.................................................... 26,207,000 26,127,178
6.46%, 9/7/00..................................................... 35,000,000 34,572,922
6.47%, 9/14/00.................................................... 15,208,000 15,003,009
6.51%, 9/28/00.................................................... 50,000,000 49,195,601
Federal National Mortgage Assn.:
6.40%, 7/6/00-7/21/00............................................. 38,000,000 37,912,889
6.41%, 7/19/00.................................................... 50,750,000 50,587,496
6.45%, 8/2/00..................................................... 25,000,000 24,856,667
6.47%, 9/14/00.................................................... 20,791,000 20,510,755
6.471%, 8/2/00(1)................................................. 20,000,000 19,998,820
6.48%, 8/4/00(1).................................................. 15,000,000 14,998,992
6.48%, 9/21/00.................................................... 52,500,000 51,724,644
6.82%, 7/17/00(1)................................................. 20,000,000 19,999,564
</TABLE>
3
<PAGE> 5
STATEMENT OF INVESTMENTS June 30, 2000 (Continued)
Centennial Government Trust
<TABLE>
<CAPTION>
Principal Value
Amount See Note 1
------------- --------------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (CONTINUED)
FNMA Master Credit Facility:
6.14%, 8/1/00.......................................................... $50,000,000 $ 49,735,639
6.60%, 9/6/00.......................................................... 39,500,000 39,014,808
6.63%, 9/1/00.......................................................... 50,000,000 49,429,083
Overseas Private Investment Corp.:
6.32%, 7/20/00(1)(2)................................................... 2,736,156 2,762,402
6.345%, 7/20/00(1)(2).................................................. 3,573,961 3,588,039
Student Loan Marketing Assn.:
6.84%, 9/15/00(1)...................................................... 25,000,000 24,998,477
Student Loan Marketing Assn., guaranteeing commercial paper of
New Hampshire Higher Education Loan Corp., Series 1995A:
6.45%, 7/20/00-7/24/00................................................. 23,825,000 23,736,226
6.48%, 7/11/00......................................................... 25,000,000 24,955,000
Student Loan Marketing Assn., guaranteeing commercial paper of
USA Group Secondary Market Services, Inc., Series A:
6.43%, 7/12/00-7/18/00................................................. 95,598,000 95,340,053
6.45%, 7/13/00......................................................... 45,482,000 45,383,997
--------------
1,087,183,569
--------------
Total Investments, at Value.............................................. 97.3% 1,159,783,569
--------------
Other Assets Net of Liabilities.......................................... 2.7 31,972,158
------------- --------------
Net Assets............................................................... 100.0% $1,191,755,727
============= ==============
</TABLE>
1. Represents the current interest rate for a variable or increasing rate
security.
2. Represents a restricted security which is considered illiquid, by
virtue of the absence of a readily available market or because of legal or
contractual restrictions on resale. Such securities amount to $6,350,441, or
0.53% of the Trust's net assets. The Trust may not invest more than 10% of its
net assets (determined at the time of purchase) in illiquid securities.
See accompanying Notes to Financial Statements.
4
<PAGE> 6
STATEMENT OF ASSETS AND LIABILITIES June 30, 2000
Centennial Government Trust
<TABLE>
<S> <C>
ASSETS
Investments, at value--see accompanying statement................... $1,159,783,569
Cash................................................................ 534,725
Receivables and other assets:
Shares of beneficial interest sold................................ 39,764,997
Interest.......................................................... 2,639,154
Other............................................................. 115,709
--------------
Total assets................................................... 1,202,838,154
--------------
LIABILITIES
Payables and other liabilities:
Shares of beneficial interest redeemed............................ 7,804,066
Dividends......................................................... 2,811,879
Transfer and shareholder servicing agent fees..................... 143,436
Service plan fees................................................. 118,941
Trustees' compensation............................................ 5,213
Other............................................................. 198,892
--------------
Total liabilities.............................................. 11,082,427
--------------
NET ASSETS.......................................................... $1,191,755,727
==============
COMPOSITION OF NET ASSETS
Paid-in capital..................................................... $1,192,303,751
Accumulated net realized loss on investment transactions............ (548,024)
--------------
NET ASSETS--applicable to 1,192,303,751 shares of
beneficial interest outstanding................................... $1,191,755,727
==============
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE...... $1.00
</TABLE>
See accompanying Notes to Financial Statements.
5
<PAGE> 7
STATEMENT OF OPERATIONS For the Year Ended June 30, 2000
Centennial Government Trust
<TABLE>
<S> <C>
INVESTMENT INCOME--Interest...................................................................... $70,474,618
-----------
EXPENSES
Management fees.................................................................................. 5,607,527
Service plan fees................................................................................ 2,486,115
Transfer and shareholder servicing agent fees.................................................... 833,564
Custodian fees and expenses...................................................................... 32,988
Trustees' compensation........................................................................... 17,609
Other............................................................................................ 277,478
-----------
Total expenses................................................................................. 9,255,281
Less expenses paid indirectly................................................................ (19,331)
-----------
NET EXPENSES..................................................................................... 9,235,950
-----------
NET INVESTMENT INCOME............................................................................ 61,238,668
-----------
NET REALIZED GAIN ON INVESTMENTS................................................................. 13,728
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................. $61,252,396
===========
</TABLE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------
2000 1999
-------------- ---------------
<S> <C> <C>
OPERATIONS
Net investment income................................................. $ 61,238,668 $ 54,416,410
Net realized gain..................................................... 13,728 121,184
-------------- --------------
Net increase in net assets resulting from operations.................. 61,252,396 54,537,594
-------------- --------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS........................ (61,238,668) (54,416,410)
-------------- --------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial
interest transactions............................................... (21,379,309) 80,656,449
-------------- --------------
NET ASSETS
Total increase (decrease)............................................. (21,365,581) 80,777,633
Beginning of period................................................... 1,213,121,308 1,132,343,675
-------------- --------------
End of period......................................................... $1,191,755,727 $1,213,121,308
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE> 8
FINANCIAL HIGHLIGHTS
Centennial Government Trust
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period....................... $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations--
net investment income and
net realized gain........................................ .05 .04 .05 .05 .05
Dividends and/or distributions to shareholders............. (.05) (.04) (.05) (.05) (.05)
----- ----- ----- ----- -----
Net asset value, end of period............................. $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN(1)............................................ 5.07% 4.47% 4.93% 4.75% 4.91%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions).................... $1,192 $1,213 $1,132 $1,027 $ 942
Average net assets (in millions)........................... $1,244 $1,245 $1,117 $1,032 $ 962
Ratios to average net assets:(2)
Net investment income...................................... 4.92% 4.37% 4.82% 4.65% 4.83%
Expenses................................................... 0.74% 0.74% 0.75%(3) 0.76%(3) 0.77%(3)
</TABLE>
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends reinvested in additional
shares on the reinvestment date, and redemption at the net asset value
calculated on the last business day of the fiscal period. Total returns reflect
changes in net investment income only. Total returns are not annualized for
periods less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses
paid indirectly.
See accompanying Notes to Financial Statements.
7
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
Centennial Government Trust
1. SIGNIFICANT ACCOUNTING POLICIES
Centennial Government Trust (the Trust) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust's investment objective is to seek a high level of
current income that is consistent with the preservation of capital and the
maintenance of liquidity. The Trust's investment advisor is Centennial Asset
Management Corporation (the Manager), a subsidiary of OppenheimerFunds, Inc.
(OFI). The following is a summary of significant accounting policies
consistently followed by the Trust.
Securities Valuation. Portfolio securities are valued on the basis of amortized
cost, which approximates market value.
Repurchase Agreements. The Trust requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Trust may be delayed or limited.
Federal Taxes. The Trust intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required. As of June 30, 2000, the Trust had
available for federal income tax purposes an unused capital loss carryover as
follows:
<TABLE>
<CAPTION>
Expiring
--------
<S> <C>
2003 $245,353
2004 278,711
2005 16,379
</TABLE>
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Trust.
Other. Investment transactions are accounted for as of trade date. Realized
gains and losses on investments are determined on an identified cost basis,
which is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
8
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS (Continued)
Centennial Government Trust
2. SHARES OF BENEFICIAL INTEREST
The Trust has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Year Ended June 30, 2000 Year Ended June 30, 1999
---------------------------------- -----------------------------------
Shares Amount Shares Amount
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold.......................... 3,599,296,440 $ 3,599,296,440 3,478,267,909 $ 3,478,267,909
Dividends and/or
distributions reinvested.... 58,889,090 58,889,090 53,427,071 53,427,071
Redeemed...................... (3,679,564,839) (3,679,564,839) (3,451,038,531) (3,451,038,531)
-------------- --------------- -------------- ---------------
Net increase (decrease)....... (21,379,309) $ (21,379,309) 80,656,449 $ 80,656,449
============== =============== ============== ===============
</TABLE>
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Trust which provides for a fee of 0.50%
of the first $250 million of the Trust's net assets, 0.475% of the next $250
million, 0.45% of the next $250 million, 0.425% of the next $250 million, 0.40%
of the next $250 million, 0.375% of the next $250 million and 0.35% of net
assets in excess of $1.5 billion. The Manager has agreed to reimburse the Trust
if aggregate expenses (with specified exceptions) exceed the lesser of 1.50% of
the average annual net assets of the Trust up to $30 million and 1% of its
average annual net assets in excess of $30 million; or 25% of the total annual
investment income of the Trust. The Trust's management fee for the year ended
June 30, 2000 was an annualized rate of 0.45%, before any waiver by the Manager
if applicable.
Transfer Agent Fees. Shareholder Services, Inc. (SSI) acts as the transfer and
shareholder servicing agent for the Trust and for other registered investment
companies on an "at-cost" basis.
Service Plan Fees. Under an approved service plan, the Trust may expend up to
0.20% of its average annual net assets annually to reimburse the Manager, as
distributor, for costs incurred in connection with the personal service and
maintenance of accounts that hold shares of the Trust, including amounts paid to
brokers, dealers, banks and other financial institutions. During the year ended
June 30, 2000, the Trust paid $123,628 to a broker/dealer affiliated with the
Manager as reimbursement for distribution-related expenses.
9
<PAGE> 11
INDEPENDENT AUDITORS' REPORT
Centennial Government Trust
To the Board of Trustees and Shareholders of Centennial Government Trust:
We have audited the accompanying statement of assets and liabilities of
Centennial Government Trust, including the statement of investments, as of June
30, 2000, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2000, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Centennial Government Trust as of June 30, 2000, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
July 24, 2000
10
<PAGE> 12
FEDERAL INCOME TAX INFORMATION (Unaudited)
Centennial Government Trust
In early 2001 shareholders will receive information regarding all dividends and
distributions paid to them by the Trust during calendar year 2000. Regulations
of the U.S. Treasury Department require the Trust to report this information to
the Internal Revenue Service.
None of the dividends paid by the Trust during the year ended June 30, 2000 are
eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Trust to the Internal Revenue Service. Because
of the complexity of the federal regulations which may affect your individual
tax return and the many variations in state and local tax regulations, we
recommend that you consult your tax advisor for specific guidance.
11
<PAGE> 13
CENTENNIAL GOVERNMENT TRUST
Officers and Trustees
James C. Swain, Trustee and Chairman of the Board
Bridget A. Macaskill, Trustee and President
Robert G. Avis, Trustee
William A. Baker, Trustee
George C. Bowen, Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Carol E. Wolf, Vice President
Andrew J. Donohue, Vice President and Secretary
Brian W. Wixted, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
Investment Advisor and Distributor
Centennial Asset Management Corporation
Transfer and Shareholder Servicing Agent
Shareholder Services, Inc.
Custodian of Portfolio Securities
Citibank, N.A.
Independent Auditors
Deloitte & Touche LLP
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of Centennial
Government Trust. This report must be preceded or
accompanied by a Prospectus of Centennial Government
Trust. For other material information concerning the Trust,
see the Prospectus.
For shareholder servicing, call:
1.800.525.9310 (in U.S.)
303.671.3200 (outside U.S.)
Or write:
Shareholder Services, Inc.
P.O. Box 5143
Denver, CO 80217-5143
RA0170.001.0600 [PRINTED ON RECYCLED PAPER LOGO]
